Income tax proportions out of wack

Where did those come from?

 

Totally agree, DaDa. Everyone's talking about Bush's tax cuts for the rich but I feel they were a step in the right direction. I think the consumption tax you talked about would be a fair way. If people wish to spend their money on extravagant things, tax them accordingly. It will help in 2 ways.

1) Even out the tax distribution.
2) Force those who spend beyond their income to show a little restraint.

 

but there is a de-facto flat tax in this country.

the real tax rate across the board is about 17-18%.

on the high end for the top and bottom 20% and a little more arond the 16 /17% for the middle class.

given the fact that state taxes, primarily sales taxes, are extremely regressive it easily counters for the somewhat progressive federal taxes.

 

Every single piece of right wing literature, some would say propaganda, about tax cuts, shares a singular characteristic: It focuses exclusively on income taxes, which are by far the most progressive part of the system, and intentionally avoids talking about any other form of tax (state, social security, medicare, property, capital gains, etc) which has the effect of exaggerating the numbers in order to make it appear that the rich are sacrficing a much greater proportion of their income than they actually are.

I doubt the veracity of this random blog's numbers in any event, but even if they are accurate the above criticism likely applies.

EDIT: thank you insane man, precisely what I was referring to.

 

ps: all these economists who support trickle down model of economics can also tell you that there is a diminishing return on the money.

for the person who makes 100 thousand, 10k isn't the same to him as the person who makes only 20k.

 

A larger proportion...of certain kinds of taxes. However, this proportion drops dramatically when you consider the totality of all taxes.

I could do the same thing in reverse, and simply cite social security and medicare. The bottom earners pay a much greater proportion of their income in thoese taxes than do the top earners. But that would be misleading for me to do that. Republican/rightwingers have no qualms about doing it however.

Insane man's numbers are right and match with those that I have seen.

Granted, I am just going off memory here, but you are just going off a random blog.

EDIT: I just skimmed over the source material and your blog doesn't support your email, which appears to have confused the % that a given group contributes to federal revenues with the % of that groups income that is taxed.

T

 

but those numbers aren't true.

in total in america:
top 20% percent pay: 18%
2nd 20th percent pay: 17%
3rd 20th percent pay: 16%
4th 20th percent pay: 14%
and the bottom 5th pay: 19%
and that includes ALL taxes

and if you wanna look at the top 10% of americans they pay about 21.4% of their income in federal taxes AFTER its been adjusted for deductions and what not. no one actually pays the tax rate. if you pay the tax rate you're a fool. get a tax lawyer. c'mon now.

and on top of all that in 02 there were some 2.1 million americans who were worth a million dollars EXCLUDING real estate. even if we assume that the taxes are high...the fact remains that the wealth of the rich is enormously more of a percentage of total wealth in america than their income.

 

I like the idea about the consumption tax as well, while striking tax on the essentials, although clothing over a certain price gets taxed, ala NYC. I like what Europe and Asia does with import luxury cars, if you can afford to buy a $100,000 porsche, another $15,000 isn't going to kill you. However, many wealthy use their money to make more money and to create business, and those shouldn't be punished by tax when they are creating jobs and helping the economy. But a guy buying a big boat so he can have wine parties and have mistresses? squeeze as much as you can out of him, they are getting them as symbols of wealth, and anyone getting a symbol isn't going to worry about the price.

 

Insane man what do your numbers say?

That the top 20% pay out 18% of their income in taxes or pay in 18% total of taxes paid? Or something else?

Again I have no idea what the percentages represent as far as the classes.

 

It has to be the percentage of their income, not the % of income tax paid by that group. Otherwise it doesn't add up to 100%.

 

no thats the effective tax rate they pay on their income. the top 20% of income earners pay about 18% of their income on taxes (i think the data was from 03 or something). thats all taxes. sales/property/capital gains/income -state and federal etc. of course they pay more then 18% of the entire tax rate. im sure they pay well that. but they also have a lot of money. you can't tax the destitute. they have nothing to pay.

look. theres diminishing returns to wealth. if you have a lot of money and we take 30% of your wealth away from you (though we dont) its not the same as if we take 30% of someone making 20k is it? plus the rich get more services. the stock market wouldn't be functional if we didn't have a stable country with social capital. so sure the rich pay a lot (in terms of dollars) of taxes but they also derive benefits.

if im poor i dont care for nice fat airports that are built and really nice benefits for companies. i dont care for tons of police if im poor and have no property to protect. the rich derive numerous benefits from the government (and taxes) that the poor dont. thats why the should share a higher burden (in terms of percentage) of taxes.

a stable somewhat egalitarian society helps the rich. insecure unstable areas would have a lot of crime and little respect for private property which would HURT the rich.

taxes aren't evil. they shoudln't be exorbitant. they obviously shouldn't let people get free rides. but they are necessary and they are good. in moderation.

 

so do away with the income tax totally
and just have a consumption tax?

Rocket River

 

Excellent post.

 

First of all, anyone who doesn't see that Bush's tax cut was heavily skewed to the rich simply is not looking at the big picture, choosing instead to focus on small bits of data within that picture.

Second, I think a consumption tax would be the way to go. Exempt food, medicine, and other necessities and give a tax credit of exactly the same amount to everyone, including a half credit (or 3/4) for each child. For a family of 4, the credit could be $15,000 (5k for each adult and 2.5k for each child) and could easily be accomplished with magnetic cards and existing technology.

Consumption taxes are far easier and cheaper to implement, and if the tax only covered new goods (goods that are "consumed" for the first time), people would have incentives to recycle products (on ebay and such) until they are useless instead of always buying a new one.

Also, by taxing expenditures rather than income, the rich would have even more reason to invest their money (hopefully in America), which would spur the economy, and regular people would have incentive to save money, which could in the long term reduce the need for social security.

 

If this side effect works, that may have a frightening impact on manufacturing in the US for a period of time, resulting in a depressed economy. If the tax system encourages us to purchase used goods rather than new, demand for new falls, and therefore the supply will have to fall accordingly. As will some of those jobs.

Tax policy is a pain in the ass. Any change, especially one this large, would require tons of study and would take years to implement properly. Not to say that makes it infeasible, but there would be all sorts of unintended consequences.

Also, why wouldn't this be viewed as a regressive tax system?

 

I think there was a thread a couple months ago that discussed that Bush was interested in implementing a national sales tax in addition to the the sales tax and getting rid of federal income tax.

 

The MARKET for used goods would increase, but there are still many, many people who would want to buy new goods. In addition, new markets would open up for manufacturers who want to refurbish their products and sell them used tax-free. The corporations would institute buy-back programs and in time, we would also see the product quality improve as well as manufacturers find ways of making their products in such a way that they can replace a few key parts and sell the unit in the newly untaxed market.

In addition, many of the places that do resale these days are mom and pop shops, which are well suited to that kind of business. Small businesses that specialize in used goods would be all over the place and would spur our economy very well. Any jobs lost in manufacturing will be made up for in technician and repair jobs opening up, jobs that pay far more than most of the manufacturing jobs out there.

The point is that all of that money will be out there in our economy, turing the circle. Demand for new goods would probably decline, which would be offset by an increase in used goods sales.

As there are with any tax policy. The point is that what we are doing now isn't working and we need to find a better way. Years of study will be needed, but we need to start those years NOW.

First, the tax would have a flat exemption (let's call it $15,000 for a family of four) that everyone is entitled to. This makes the playing field equal for everyone, but since $15k is a much smaller percentage of income for someone who makes $30k than is is for someone who earns 200k, the effective impact of this exemption would favor the middle and lower classes.

In addition, the middle and lower classes (many of whom need 2 incomes to make ends meet these days) would have ways to save even MORE money by buying used goods wherever possible. The rich are far more likely to just go out and buy new stuff, which will further shift the burden to the wealthiest among us.